2025 Revolving Underwriting Facility (RUF) Explained: Costs, Benefits, and How It Works

Andy Smith, a Certified Financial Planner (CFP®), licensed realtor, and educator with over 35 years of expertise in personal finance, corporate finance, and real estate, has guided thousands toward financial success.

What Is a Revolving Underwriting Facility (RUF)?

A Revolving Underwriting Facility (RUF) is a specialized revolving credit arrangement where a consortium of underwriters commits to providing loans if borrowers fail to sell their euro notes in the eurocurrency market. This market involves deposits of lending currencies held at banks outside their home countries, offering a global platform for currency lending.

Typically, loans under a RUF are made through the purchase of short-term euro notes—discounted promissory notes maturing within one to six months.

Key Highlights

• A RUF consists of underwriters offering loans when borrowers can't sell euro notes in the eurocurrency market.
• The underwriting bank agrees upfront to purchase unsold euro notes at a predetermined price.
• Loans are short-term, usually maturing within six months or less.
• One bank usually acts as the arranger, managing the revolving credit and marketing the euro notes.

How Does a Revolving Underwriting Facility (RUF) Work?

In a RUF, the underwriting bank guarantees to buy any unsold euro notes from the borrower at an agreed price, providing a safety net in the highly competitive and less regulated eurocurrency market that spans global financial centers beyond Europe.

This agreement ensures that if the borrower cannot sell their euro notes, they can still access funds through the bank, paying interest only on the borrowed amount.

Important Considerations

Loans facilitated via RUFs are short-term, with maturities not exceeding six months. The arranger bank also takes a minor financing stake—usually less than 10%—while marketing the notes to potential investors.

Benefits of Using a Revolving Underwriting Facility (RUF)

The eurocurrency market's appeal comes with regulatory and interest rate challenges domestically. A RUF helps borrowers bypass some domestic regulations, tax laws, and interest rate limits, often resulting in lower borrowing costs and better returns for lenders.

However, the reduced regulation increases risk, especially during financial instability. RUFs provide a crucial safety net, offering borrowers protection against market unpredictability in exchange for a fee.

RUF vs. Note Issuance Facility (NIF): Understanding the Difference

Both RUFs and NIFs offer short- to medium-term credit in the eurocurrency market, but NIFs focus on purchasing unsold notes after issuance without underwriting loans. NIFs were prevalent in the 1980s and, when lacking underwriting, are often called euro-commercial paper (ECP) programs.

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